PWC: Nigeria’s Mining Sector Fraught with Challenges, Despite Huge Potentials

Emma Okonji

A recent report published by PricewaterHouseCoopers (PwC), has described the Nigerian mining sector as a profitable sector that could attract the interest of both domestic and international investors to boost the Nigerian economy.

It however decried the dwindling activities of the sector, which according to the report, is fraught with challenges that are capable of preventing it from attaining its laudable goals, because it lacks the necessary support from government.

According to the report seen by THISDAY, the mining industry was once a substantial contributor to the growth of the Nigerian economy, accounting for approximately four to five per cent of the Gross Domestic Product (GDP) in the 1960s and 1970s.

“However, with the discovery of crude oil, the industry suffered from neglect, resulting in a mere 0.17 per cent contribution to the GDP from 2018 – 2022. In order to achieve the ambitious three per cent target set in the mining roadmap for 2025, significant efforts must be undertaken to catalyse growth in the sector.

“The Nigeria mining industry continues to attract domestic and international investors despite the fact that it is still quite underdeveloped. Given the industry’s potential as a major revenue earner for the country, government needs to tackle the challenges in the mining industry if it is to reap the benefits of the sector,” the report said. 

The report reviewed some of the strategic minerals in the sector, and concluded that the mining of Iron Ore, Baryte and Coal is weak, while the mining of Lead/Zinc and Gold is moderate, but said the mining of Limestone is a bit strong.

The report added that in spite of the presence of mineral resources like Iron Ore, Baryte, Lead/Zinc, Gold and Coal, Nigeria still import steel and local scrap that are processed from Iron Ore, as well as roofing sheets and batteries that are processed from Lead/Zinc, and jewelries that are processed from Gold. There is however a minimal local use of Coal in the country, according to the report.

Analysing the report, Partner, Mining Leader, PwC Nigeria, Cyril Azobu, said Muhammadu Buhar’s administration made a significant breakthrough with the launch of the Electronic Mining Cadastre plus (eMC+), which is a digital cadastral system that grants access and manages titles for all existing investors and prospects in real-time and around the world.

“In line with the Nigerian Minerals and Mining Act 2007, each state across the country has inaugurated a MIREMCO. The purpose of MIREMCO according to the Mining Act, is to oversee mining operations, supervise the environmental aspects of mines and tackle illegal mining,”Azobu said.

A roadmap for the growth and development of the Nigerian mining industry was launched in 2016 for the purpose of creating a globally competitive sector capable of contributing to wealth creation, providing jobs and advancing social and human security.

The report highlighted some of the targets on the roadmap and achievements so far in the areas of revenue growth, employment and contribution to GDP.

In the area of revenue generation, the report said the sector increased its solid mineral revenue generation since 2015, as government’s solid mineral receipts witnessed a growth of 78 per cent from N 64.46 billion recorded in 2015 to N114.8 billion in 2020. It however said the trend analysis of the sector’s earnings revealed a snail speed growth, insisting that there are ample improvement opportunities if the sector must achieve the N 284 billion target by 2025.

In the area of employment, the report said as of 2015, the sector employed over 86,000 of the Nigerian workforce. This number rose to over 111,000 in 2017 and subsequently to 130,000 in 2020. It however said its employment-generation potential of three million jobs by 2025 is far from being realised.

In the area of GDP contribution, the sector contributed less than one per cent between 2015 and 2021, but increased steadily from 0.13 per cent in 2015 to 0.23 per cent in 2022, the report said, adding that achieving the three per cent target by 2025 as captured in the mining roadmap requires significant effort.

The report blamed the current challenges of the sector on insecurity, smuggling, tax alignment issues, illegal mining and inadequate funding on the part of government.

The report quoted the former Minister of State Mines and Steel Development, Uchechukwu Ogah, who had disclosed that Nigeria had in the past six years lost revenue estimated at $5 billion to smuggling of gold. The spike in gold smuggling in the country has once again highlighted the socio-institutional and structural challenges in governance, the report further said.

Partner, Head Mining Sector Business Development at PwC Nigeria, Habeeb Jaiyeola, advised President Bola Ahmed Tinubu to consider moving the sector forward by tackling insecurity, harmonising policies and regulations in the mining sector, driving strategic minerals development and de-risking investments in the sector.

Proffering solutions on the way forward, the Manager, PwC Nigeria, Eche Uduji, in the report, said: “The new administration of Bola Tinubu should focus on creating more private sector driven success stories, which will contribute to attracting other stakeholders into the sector and creating a vibrant gold value chain in Nigeria. The federal government, through effective collaboration with host communities, should use technology and licensing databases to improve tracking and formalisation. This will also aid targeted support by the government on training, access to equipment and funding, and implementing safe mining practices. The Artisanal and Small Scale Mining (ASM) department of the MMSD has taken steps in this direction, but this needs to be significantly enhanced.”